CFA-LEVEL-1 Online Practice Questions and Answers

Connery, a smart professional, passed his Level II CFA exam 2 years ago. He could not take the Level III exam due to professional time commitments elsewhere. He is thinking of taking Level III a couple of years from now, once things settle down on his personal front. His resume, which he has sent to a few prestigious firms, states that he is a candidate in the CFA program and has successfully completed Level II exam. He makes no exaggerated claims about his abilities on his resume. Connery has:

A. violated Standard II (A) - Use of Professional Designation. He cannot claim to be CFA - Level II.

B. not violated any standards.

C. violated Standard II (A) - Use of Professional Designation. He cannot claim to be in the CFA program since he is not registered to take Level III exam.

D. violated Standard II (A) - Use of Professional Designation. He cannot claim to be in the CFA program without having completed the Level III exam.

You are given a risk-free rate of 7% per year, a portfolio return of 19% per year, and a standard deviation of portfolio return of 12% per year. What is the Sharpe measure of risk-adjusted performance?

A. 1.111.

B. 0.583.

C. 1.000.

D. 1.583.

How long will it take money to double at 9.5% per year, compounded annually?

A. 28.03 years

B. 1.29 years

C. 10.14 years

D. 7.64 years

E. 4.1 years

The primary purpose of the statement of cash flows is to

A. state the company's financial position at period-end

B. measure the change in the company's assets

C. provide information about a company's cash receipts and cash payments during the accounting period

D. analyze net income during the accounting period

Which of the following statements about the Securities and Exchange Commission (SEC) is true?

A. The SEC must audit all financial statements of publicly traded corporations.

B. The SEC has issued specific rules and regulations concerning the preparation of financial statements and the degree of detail that they contain.

C. None of these statements are true.

D. The SEC functions as the standard-setting body of the accounting profession.

Beginning inventory of 50 units, purchased at $5 50 units purchased at $10 35 units purchased at $9 25 units sold at $15 70 units sold at $12 Tax rate = 40% Beginning LIFO reserve = $300

Given the above, the net income using Average Cost method is ________.

A. $279

B. $224

C. $381

D. $249

The following information is from the financial statements of Complex Capitalists for 1997 and 1998:

Dec. 31, 1997 - 1 million common shares outstanding, capital structure all-equity

March 31, 1998 - issued 200,000 common shares.

May 31, 1998 - issued 800,000 warrants exercisable at a strike of 35.

The average price during 1998 was 34 and the maximum price was 39.

Given the above example, the Diluted EPS will use how many shares?

A. 1.2 million

B. 2.0 million

C. 1.617 million

D. 1.15 million

Simone Girau holds a callable bond and Chi Rigazio holds a putable bond. Which of the following statements about the two investors is TRUE?

A. As the yield volatility increases, the value of both Girau's bond and the underlying option increases.

B. Both investors calculate the value of the bond held by adding the value of the option to the value of a similar straight bond.

C. Girau's bond has less potential for price appreciation.

D. If yield volatility increases, the value of Rigazio's option will decrease.

If a firm uses debt financing (Debt ratio = 0.40) and sales change from the current level, which of the following statements is most correct?

A. The percentage change in net income relative to the percentage change in sales (and in EBIT) will not depend on the interest rate paid on the debt.

B. The percentage change in EBIT will equal the percentage change in net income.

C. The percentage change in net operating income (EBIT) resulting from the change in sales will exceed the percentage change in net income (NI).

D. Since debt is used, the degree of operating leverage must be greater than 1.

E. The percentage change in net operating income will be less than the percentage change in net income.

When using macroanalysis in estimating an industry earnings multiplier

A. you first estimate the industry growth rate (g) which is determined by the retention rate and the return on equity.

B. you examine the relationship between the multiplier for the industry and the market.

C. you first estimate the industry required rate of return (k) because this is influenced by the risk-free rate and the expected inflation rate.

D. you compute an average multiplier for the industry.

E. you examine the specific variables that influence the earnings multiplier.